Should Your Organization Conduct Background Checks On Contractors And Vendors?

Background Screening | February 21, 2022

What are the advantages of conducting background checks on contractors and vendors? Is this something that your organization should be doing? In this blog, we’ll answer these questions and more. 
If your organization uses a service network of contractors to accomplish tasks for your customers such as delivery, installation, or repair services, the risk and liability of working with this extended workforce is something you need to think about at least sometimes. And if it hasn’t been on your mind lately, it probably should be. As for whether you should conduct background checks on contractors and subcontractors, from our perspective, the answer is a resounding ‘yes’.

How is A Contractor Different from an Employee?

While an employee and a contractor may sometimes do the same work and accomplish the same tasks for your organization, there are legal differences that cause them to fall into two different categories. For example, an employee will usually fill out an application, go through an interview process, and work closely with your organization’s team. Their performance will be monitored by a direct supervisor, they will receive regular paychecks, and all of their income must be reported to the Internal Revenue Service by their employer.

Alternatively, a contractor may only interact with your organization through a department or individual who needs them to accomplish their specific tasks. They are usually paid by your organization’s accounting department after they have submitted an invoice for their work, and their income is reported when your organization issues them a 1099 for that tax year.

Contractor relationships can come in many different forms, including:

• Workers from a staffing agency
• Consultants
• Temporary workers
• Subcontractors
• Independent contractors
• And more

Many organizations rely on their internal policies as well as federal and state screening laws when deciding if they need to conduct background checks on contractors. It is not unusual for your contractors and vendors to need to go through a very similar screening process as that of your full-time employees.

What are the Advantages of Conducting Background Checks on Contractors?
Besides keeping your organization compliant with legal requirements (where they apply), background screening of your extended workforce comes with a variety of advantages. First and foremost, your customers expect it. A study conducted by PlusOne Solutions and Mindspot Marketing Research & Solutions found that more than 90% of consumers assume that the service contractors that provide their in-home services have been thoroughly vetted and screened before providing service. 
Having a background screening program in place for your contractors also protects your organization from potential liability. While the majority of your contractors will be honest individuals that are there to help your organization, there is always a small percentage of people that will not be compliant with your organization’s requirements. And the unfortunate truth is that this small percentage of individuals are the ones that cause the largest problems and can create bad situations that damage your organization in reputational, legal, and financial ways. 
Conducting background checks on your contractors will also protect your customers. By screening contractors, your organization is taking proactive steps to keep violent criminals and sex offenders out of your customers’ homes. 

What Laws Apply To The Contractor Screening Process?

The FCRA, or Fair Credit Reporting Act, regulates the use of background checks for employment purposes in the United States. According to the FTC (Federal Trade Commission), the FCRA also applies to contractor screening. Additionally, there are local and state employment regulations that may have an impact on how your organization screens contractors. Many of these regulations require that organizations show that the use of background checks is directly related to the position they are screening their employees or contractors for. 
Our team at PlusOne Solutions is always here to assist you in better understanding the regulations that will apply to your organization. Our contractor risk management solutions can help you better protect your organization from the risks associated with working with an extended workforce. Contact us today to learn more about how our services can work for you.  

Contents are provided for information purposes only and should not be construed as legal advice. Users are reminded to seek legal counsel with respect to their obligations and use of PlusOne Solutions services.

About PlusOne Solutions
PlusOne Solutions has been an industry leader in the risk management field by specializing in compliance programs that meet the complex challenges of geographically dispersed contractors, vendors, and employee networks. PlusOne Solutions protects companies from possible financial, legal, and reputational risks associated with contractor and vendor relationships while creating safer work environments. To learn more, visit https://www.PlusOneSolutions.net.